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The Value of Disciplined Investing

TW-WA ARTICLE

As we have entered a new era of uncertainty, with an evolving trade war, slower economic growth and significant geopolitical conflict emerging regularly from south of the border, it’s worth a reminder: Your portfolio has been structured to provide solid risk-adjusted returns over the long term, with the expectation that markets will experience both up and down periods along the way.

Navigating Choppy Waters

In times like these, discipline plays an important role in investing. As advisors, it’s our role to stay unemotional and keep focused on building portfolios based on research and fundamentals.

The dilemma, of course, is that human nature often compels many investors to want to take immediate action when faced with adverse conditions. It’s a natural response, as we are innately hard-wired to react for survival. However, sometimes the best course of action is to do nothing at all.

While it might feel like the right response to exit the markets when things get tough, the opportunity cost of doing so—when markets reverse their course, often unexpectedly—can have a profound impact on future wealth. Missing out on even a few days of good performance can have a detrimental effect on a portfolio. The chart below shows the impact on the S&P 500 Index over 10 years ending August 31, 2023. Indeed, doing nothing…is doing something!

Consider also a study of nearly 120,000 investors in the U.S. which found that a well-structured wealth plan alongside the support of an advisor can be key to staying the course. During the 2020 pandemic, 

when the U.S. stock market fell 34 percent in just 22 days, over three-quarters of investors who were previously on track with their financial goals remained on target, even though their portfolios typically declined by 16 percent (and quickly rebounded).1

Having a sound financial plan provides a crucial roadmap, but during more challenging market times, support to navigate the uncertainties is important to help keep you on track. Studies have attempted to quantify the value of this support, with one study suggesting that behavioural coaching alone can provide an average annualized return of at least 3.4 percent.2 This highlights the substantial impact of investor behavior on returns.

Staying invested is important, but consistently saving is also critical. Part of our role as advisors is to encourage disciplined savings and investment habits, which can significantly improve wealth over time. Just as a personal trainer helps clients stay committed to fitness goals, we are here to help ensure consistency and focus along the financial journey, throughout the inevitable market ups and downs. Studies show that households working with an advisor for 15 years or more accumulate 2.3 times the assets of those without advisor support.3

Looking Beyond Investing

Wealth management is about more than just investing and it evolves at each stage of life—from goal planning, such as saving for a first home or child’s education, to investment tax planning, retirement planning, business building and succession, estate and legacy planning and intergenerational wealth transfer. We have access to a network of experts who can provide specialized support where needed. We are also committed to being a resource for you, providing education and insights on factors impacting your wealth so you can make informed decisions. This newsletter is just one way to deliver actionable insights to help better manage your financial position. As we navigate these uncertain economic times, we are here to support you to make informed decisions, manage risk and maintain focus on your longer-term financial goals. We remain grateful for your continued trust in our services as we build a secure and prosperous future.

1. https://www.morganstanley.com/articles/stock-market-crash-financial-planning; 2. https://russellinvestments.
com/-/media/files/au/support/voa/voa_report_2023.pdf; 3. https://cirano.qc.ca/files/publications/2020RP-04.pdf

The information contained herein has been provided for information purposes only. The information has been drawn from sources believed to be reliable. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Financial Inc. (Wellington-Altus) is the parent company to Wellington-Altus Private Wealth Inc. (WAPW), Wellington-Altus Private Counsel Inc. (WAPC), Wellington-Altus Insurance Inc. (WAII), Wellington-Altus Group Solutions Inc. (WAGS), and Wellington-Altus USA Inc. Wellington-Altus (WA) does not guarantee the accuracy or completeness of the information contained herein, nor does WA assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact your financial advisor..

©2024, Wellington-Altus Private Wealth Inc., Wellington-Altus Private Counsel Inc., Wellington-Altus Insurance Inc., Wellington-Altus Group Solutions Inc., and Wellington-Altus USA Inc. ALL RIGHTS RESERVED. NO USE OR REPRODUCTION WITHOUT PERMISSION. www.wellington-altus.ca

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The opinions contained herein are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Wellington-Altus Private Wealth. Assumptions, opinions and information constitute the author’s judgement as of the date this material and subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. All third party products and services referred to or advertised in this presentation are sold by the company or organization named. While these products or services may serve as valuable aids to the independent investor, WAPW does not specifically endorse any of these products or services. The third party products and services referred to, or advertised in this presentation, are available as a convenience to its customers only, and WAPW is not liable for any claims, losses or damages however arising out of any purchase or use of third party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus.